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Sony Movies Disappear from Netflix Streaming Service

"This is the result of a temporary contract issue between Sony and Starz," Netflix says in a blog post.

NEW YORK - Sony movies have disappeared from Netflix's streaming video service, Netflix and Starz said on Friday, citing a temporary contract issue between Sony and Liberty Media's Starz premium TV service.

Starz has output deals with Walt Disney and Sony and has been negotiating a potential renewal of a digital distribution deal, which currently runs through early 2012, with Netflix.

A source said the issue at hand has to do with Netflix's continued strong subscriber growth, which triggered a subscriber cap in the Starz-Sony contract. Starz requested that Sony films be taken down from Netflix's online service temporarily while the parties work through the contract issue. The exact cap and further details weren't immediately clear.

"Sony movies have been temporarily taken down from the Starz Play service on Netflix," a Starz spokesperson confirmed. "All parties are working diligently to resolve the issue and return the films to Netflix members."

A Netflix blog post on Friday had first brought the issue to light.

"You may have noticed that Sony movies through Starz Play are not currently available to watch instantly," Pauline Fischer, vp of content acquisition at Netflix, said in that post. "This is the result of a temporary contract issue between Sony and Starz and, while these two valued partners work through their differences, we hope you are enjoying the wide variety of new movies and TV shows added daily."

Netflix and Starz didn't say how long the contract issue may take to be resolved, but sources said the parties are hoping to work through it as quickly as possible. Sony didn't comment.

BTIG analyst Richard Greenfield said there are several possible ways to resolve the issue. Sony and Starz could "simply work out" the issue or "Netflix can offer Starz streaming to a subset of users (to reduce the streaming sub count) without a larger Starz/Netflix renegotiation," he said. But he added: "We believe a more likely scenario is that this impasse creates a catalyst to trigger an earlier renegotiation between Netflix and Starz (rather than wait until Jan. 2012). We suspect Starz wants to have a sense of what its new Netflix deal looks like before it renegotiates with Sony in terms of how much of the dollar upside goes to Sony versus Starz."